Ideals and reality
In an ideal world, a group practice acquisition would look something like this: Both the hospital and physician practice would be on a common information system, or at least two systems that could easily share data. Care could more be seamlessly coordinated across the inpatient and ambulatory settings, and the larger and more diverse the group practice, the easier to keep patients within the confines of the hospital-and outside the reach of competitors. Cash-strapped physicians would benefit from having the technological resources offered by the hospital. And economies of scale would figure in as well, with common operations staff shared across physician practices, as opposed to each hiring its own support staff.
But in the real world, the huge spate of practice acquisitions isn't playing out so nicely. The move by hospitals is laden with risks, not the least of which is I.T. Hospitals acquiring practices are not always getting a clear picture of what they're buying, financially and clinically, often due to limitations in data analytics. And once the deal is done, hospitals are facing even more substantial challenges in getting physicians up on their EHRs and activating physician billing.
Having physicians attest to meaningful use is an imperative-otherwise they face long-term, permanent reimbursement cuts. But that's no easy feat, particularly for practices converting from a paper-based documentation system, as many acquired groups are.
Some industry veterans are sounding the alarm. Donna Kell, who runs a Pittsburgh-based billing company for private physician practices, has seen many a practice bought-and then later cut loose when the deal didn't work as planned. "Some health systems have acquired practices, cut them loose and now are trying to reacquire them," she says. "It is a bit of a vicious cycle."
Managing the group practice revenue cycle is a whole new world for hospitals, Kell says. When they buy practices, they do not always understand what they're getting-particularly in the complex arena of cash flow. That's because the data needed to adequately undertake the due diligence is often buried in the physician practice management system, and often not understood by the physicians themselves.
She cites the example of a podiatrist who does foot debridement for Medicare. "His billing system shows X amount of reimbursement, but it can't distinguish between procedures done in the office from those done in a nursing home. The payment gap is big. The hospital buying the practice has not drilled down far enough to know where the procedures are done, but they'll use the data to estimate his income. Later, they find that most of his procedures were done outside the office and they don't generate the revenue they expected. No one in the hospital knows to ask the question."
After the deal goes through, hospitals may be in for other surprises as well-particularly around physician billing. "When a hospital buys a medical group, the I.T. risk is significant," says Wasserman. "If you try to bring in a group using your hospital billing systems, you can jeopardize your cash flow. There is a big difference in how you structure professional billing versus physician billing, not just with the technology but in the organizational structure."
Even if the hospital's information system can handle physician billing, without a proper set-up the hospital may unwittingly sacrifice 3 percent to 4 percent of revenue, Wasserman says. "That can be a large number and it's very important to do it right." He cites the example of one hospital client that, after acquiring a number of physician practices, attempted to deploy best-of-breed systems on its inpatient and ambulatory sides. "But the two systems didn't work well together and were not bi-directional. They wound up doing patient registration manually. Now the hospital is looking for an integrated information system."
Kell's clientele-consisting of 10 small, specialty group practices-do not even use EHRs and do their billing manually. "They fill out encounter forms, we load that into a database and we electronically submit claims for them and do the follow-up. Even though these acquisitions are going on, our market is not going away and there are still plenty of private practices."
Why docs sell
Physicians sell, Kell maintains, because of frustration over billing. "They are fed up with how difficult it is to get paid. Most doctors don't want to deal with it. They'd rather outsource their billing or join a larger entity."
In a corollary to the productivity drop in the '90s, hospitals buying practices do face similar revenue risks, but for different reasons, adds Wasserman. "There are still a lot of hospitals with state-of-the-art EHRs and the systems can dramatically impact the efficiency of the practice. Physicians are learning how to do things electronically and it is slowing them down and impacting the revenue stream." One hospital Wasserman advises saw professional revenue reimbursement plummet nearly 30 percent within a year of an acquisition. Hospitals have tried to cover the productivity issue in their employment contracts, which often compensate physicians based on a relative value unit model-one that essentially rewards them based on work done.
But even if productivity issues are addressed, moving physicians to an EHR-and many acquired groups are moving from paper-based environments-is fraught with its own kind of peril, Silvers observes. One big fear factor revolves around meeting meaningful use. "If physicians don't show meaningful use, they won't get paid an incentive and they will be penalized in the future. Hospitals don't know if the doctors being bought can show meaningful use. If they do, the hospitals get a huge amount of money and it's a way to finance the expansion. But hospitals don't understand the I.T. risks."
Bringing a group practice into the hospital fold causes another major technology challenge-data integration. Historical patient records can't be simply scrapped-myriad state laws typically require they be kept for several years, plus physicians often need to access them for current patients. That has led some practices, such as Advantage Health, to undertake massive document scanning efforts. "The physician has a ton of accumulated knowledge in paper," says Blair, the hospital-based practice's president. "There's no good way to get it out. Old paper charts can be 12 inches thick."